tv Bloomberg West Bloomberg April 15, 2014 11:00pm-12:01am EDT
♪ >> live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang. yahoo! has its earnings report out and the numbers are encouraging. will it be enough to stop the recent slide in tech stocks? time is running out if you want to buy google glass. here's a check of your top headlines. there are more signs of hope for the pc business.
intel reported a 1% rise in sales. more corporate orders helped offset the overall decline in the consumer market. that will be coming up later in the hour. i will speak with the cfo. the microsoft ceo has announced new data analysis tools at an event in san francisco. it includes a limited preview of the service. it measures data from sensors and connect it in the internet of things. microsoft is taking on oracle and ibm. a federal judge has ruled against apple and is refusing to throw out an antitrust case. the move allows state officials and consumer attorneys to pursue damages against apple at a trial in july. plaintiffs are seeking $840 million. to our lead story of the day,
the sellout in tech stocks takes a bit of a breather. the nasdaq is down 3.4% for the year. individual tech stocks were also on a crazy ride. facebook did some more rebounding. yahoo! was surging in after-hours after reporting its first sales gain since 2012. sales were $1.09 billion in the first quarter. profit was $311 million. chinese e-commerce site alibaba posted a rise in revenue in the last quarter of 2013. yahoo! owns 24% of the company. how much of the sales gain is due to alibaba? how much is due to marissa mayer?
gene munster is with us from minneapolis. we have a china market research managing director from shanghai. there are some mixed headlines about yahoo! growth. their sales did rise 1%. it is not much, but it is not nothing. >> it is something. it has been a couple years and they have grown. the number has been down. that was up 2%. it is pretty modest. in the world of yahoo!, where there is a lot of concern that the pool will not grow, that was encouraging. it gets easier in the june quarter. let's give them credit where credit is due. marissa came in with a very difficult task of turning around a core business that had structural challenges and it is growing. >> marissa mayer is also saying
that the company is moving through stable and modest growth. she used that word, modest. i will ask you about alibaba. we will get a peek at how they are doing. they are more concerned about growth and how they can keep it up. there is sales growth. net income is up. these numbers include single sales. what is your take on these numbers? >> these numbers are great. there are a lot of concerns that the sales revenue numbers will be slowing. they had a great fourth quarter. it is largely driven by china. they sold $5.8 billion of
products. the key number is that their operating margin went up 54%. these numbers are quite good if they go into their ipo process in new york or potentially in hong kong later this year. alibaba will continue to grow. there are concerns that we will continue to talk about. let's get to that in a moment. i want to correct -- alibaba sales are at 66%. >> how good is yahoo!'s business without alibaba? >> the business is struggling. it is up fractionally. i would say, how good is the stock? that is a whole different story. you have half the value in alibaba. when you look at the move in the aftermarket, 3/4 of that move is based on alibaba results. >> how is alibaba positioning itself in the chinese market? there's so much more going on that we need to understand. they are making acquisitions and big investments. how much of this is moving toward a single unified strategy
going forward? how much of this is responding to competitive dynamics? >> that is a great question. in 2013, alibaba was the most dominant e-commerce player. we saw in q1 that its platform was able to corner the market in the mobile device sector. what has happened is that they have bought 20%. they are buying stakes in a variety of companies. there is a lot of heat on them. a lot of people are thinking that the tencent platform will do a lot better. you will see a lot of consolidation with tencent and alibaba. they are making it one of their acquisitions. that is why you saw alibaba spend over a billion dollars buying a mobile phone mapping service. that was announced last week.
>> yahoo! has agreed to sell half its stake in alibaba when the company goes public. how do you want it to use that cash? >> based on some of the comments, i would say that investors want to give it back. the cfo talked about a $300 billion cash balance. -- $3 billion cash balance. when you think about that, they will have the shared dividends. that is part of the plan with alibaba. investors will get some of that. acquisitions are the status quo. you need a strong balance sheet. what marissa mayer outlines around social and native advertising, all of those are -- if you asked me specifically
what acquisitions could they do that could really beef up what they already have, they have [inaudible] it is probably just eyeing teams to make some of their existing products better. >> we have been talking about the tech selloff. chinese tech stocks are also down. china mobile is down 11%. how much concern is there about this within china? could this impact alibaba? >> alibaba is definitely concerned. they're happy about these numbers. they are probably touting the yahoo! reports to a lot of journalists. you will see it bounce back. it goes to the question you just asked, what should yahoo! do? i do not think they should have sold to alibaba. there are few companies that are better positioned for growth. the china story is compelling. you will see it bounce back in tech stocks. there has been too much selloff.
>> how concerned are you about the selloff? is this something that will continue? >> with the intel results and the yahoo! result, it is big. we will get a rally here. the fundamentals for the business seemed good. in 2008, the fundamentals looked good. a couple quarters later, they fell apart. it is not an ironclad endorsement, the fact that the fundamentals are good. it is encouraging. intel and yahoo! have had slightly positive results. that is encouraging. i think that this is a nice sigh of relief. we can expect a rally in the tech space over the next week.
>> what is your confidence level in marissa mayer? >> probably a 7 or an 8. i think she has taken a difficult job and done a great job. she set expectations that she managed to beat. >> that is not too bad. piper jaffray analyst gene munster and from china market research, thank you both for weighing in. protesters are preparing for a march outside of twitter headquarters. we are live at the san francisco headquarters. why should twitter fork over $56 million to the city? you can watch us streaming on your tablet, phone, and amazon fire tv. ♪
>> i'm emily chang and this is "bloomberg west." the anticipation is building. a group of union workers is marching there with a bill that they want twitter to pay. protesters believe that twitter got a tax break from the city. they want twitter to pay that back. megan hughes is outside. it is pretty quiet there. are we expecting this protest to be big? >> organizers are saying that 1000 people will be meeting at the hall. they say that they will cut off some rush-hour traffic. they are headed here to twitter to protest. they are called twitter tax breaks. there are more than a dozen
companies that get these breaks. they are luring them to this area. these companies get to be exempt from new payroll taxes for new hires. it encourages growth. they are also exempt from salary taxes on stock. these workers who are protesting are largely union workers. they say that the city does not need to give these sweet deals to tech companies. they will stay here regardless. this is about income inequality. >> twitter has not paid these taxes. legally they do not have to. the mayor of san francisco has been a target of these protesters. we caught up with him earlier and asked about the responsibility of these companies. take a listen to what he had to say. >> everyone has approached the challenge in a different way. i want to make sure that they are doing everything they can to help us. if we have a partner and they
are helping me re-create the vacant storefronts, i would like them to help. the challenges are very visible. that is what i will challenge everyone to do. i am making phone calls. >> ed lee around with another, he is a big angel investor . a lot of technology companies have been calling on other companies to step up. maybe they do not pay more money, but get more involved in the community. what are these companies doing on that front? >> part of this deal started in 2011. it was a good-faith provision that they would be involved in community training and hiring efforts. a lot of these companies that signed on and are responsible in some way -- i will tell you that
the critics and the protesters say that those provisions do not have any heat. there's no way to quantify all of that. as you heard the mayor talking about it there, these empty storefronts are something that you have seen. you can quantify how much these communities move into this area and how much that has changed things. you look back in 2010 and there were more than 30% empty storefronts. it was the worst area in the city. within three years, it was down to 20%. you can see it in the development all around here. >> megan hughes, twitter headquarters. we will be monitoring this. thanks so much. still ahead, xl partners invests in companies like facebook and spotify. we will speak with one of their investors in mobile. ♪
>> welcome back. this is "bloomberg west." google is putting google glass on sale for the general public for one day only. it costs $1500 for access to the program. it is available only to adults living in the united states. google has a patent application pending. i sat down with a partner at xl partners. how optimistic are you that google glass will go mainstream? >> glass is still in beta. when you talk about it at this point, it is still intimidating to developers who want to develop applications. the reality is that you try the
product and you read the reviews. it will be a while before it becomes mass market. it is interesting to those of us who live in the valley. it is a while before the mainstream will adopt google glass as a product. >> someone from coastal ventures told me that it has zero chance of going mainstream. >> it is too early to predict. when google bought android in 2005, everyone thought that the idea of google moving into mobile was not good. no one thought that an american company would become a major player in operating systems. if you look back nine years, google executed that incredibly well. >> in terms of wearables in
general, as a mobile investor, how closely are you looking at wearables? wristbands aren't even going mainstream. >> we are not investors in fitbit, but we are big believers in that trend. one of our partners is involved with "my fitness pal." that is a real and durable trend. the fitness aspect of wearables is extremely real and it is accelerating. even if the glass is in beta -- >> what about people who do not want to measure their life lately? i have plenty of wristbands that i do not want to wear everyday. >> everyone has a different view. as a serious user of fitbit, i have gotten a lot of motivation from it. you can compete with your friends. it is a motivating behavior. fitbit and fuelband and a lot of
wearables are genuine trends. >> what is hot in mobile? >> in the last five years, it was about liquidity and now it is about richness. android was approached by google in 2005. now one billion smart phones were shipped this year and 250 million tablets. the idea of mass ubiquity is happening. despite the fact that we have smartphones, apps are still down or not fully integrated. when you look at a google service or a predictive keyboard or a web iq, the idea of these applications becoming smart or predictive is a new idea. >> you are speaking to the cofounder of secret apps today.
some people think that these are not good for the world. what do you think? >> we are not investors in whisper. they have had a lot of growth. anonymity on the internet is not a new idea. it goes all the way back to chat rooms. these behaviors that people are concerned about and people sharing ideas anonymously, i do not think that now that it is on a mobile device it is necessarily better or worse. i do think that secret and whisper are very likely to have to use moderation. i have to do it and they will do it -- in part of making those communities robust.
>> what about snapchat? >> i think snapchat is different. it is ephemeral. it is past the tipping point. i do think it is here to stay. >> one of xl's partners talking about hot trends in mobile. we will talk a lot more about the dangers of mega-funding that we have seen. he is concerned about the selloff in tech stocks. are we in bubble territory? nobody else has repeated that. you can watch us streaming on your tablet, your phone, or bloomberg.com we will be right back. ♪
>> you are watching "bloomberg west," where we focus on innovation, technology, and the future of business. we returned to my earlier conversation. one company was acquired by twitter. he was most recently involved with another company. i asked if facebook and google are interested in buying from companies and whether it may be too early. >> the reality is something you buy for core technology. there are a lot of options. sometimes the original idea does
not become completely fulfilled. we talked about android and how google made that a big success. sometimes you take the team and you focus on other areas. i am reading the same reports that you are. there's a view that drones could be applied to mapping technology. navigation or broadband internet service. anyone who looks at it would say that it is pretty early. >> there has been so much activity in acquisitions. facebook was buying whatsapp and oculus. mega-rounds of funding being raised. we are talking about 3-digit -- excuse me, 11-digit rounds and multiple rounds like that this year. what is going on?
are things getting too hot? >> we've talked before. there are a number of major revolutions going on in technology. there is a coincident with the rise of big data. we are moving to new forms of social internet. if you are an incumbent technology company and you are not riding one of these trends, you can get pretty scared. you can get left behind if you are not one of the key players. on the flipside, if you are a target company, and you are the personification of one of these shifts, you can be extremely strategic. you have seen that intel did a large investment in cloud. that is an example of that. >> i have been asking everyone on the show. do you think we are in a bubble? there has been a tech selloff. i want you to take a listen to this interview. >> it has been a steady
sequence. we are in bubble territory. if you notice, very few people are saying it. >> you are the first person who is saying it. >> no one wants to break it. everyone wants to cash out. >> are we in bubble territory? >> if you want to make the comparison to the 2001 era, i think we are not. the new majority of companies are being funded and have realistic models. there are real cash flows. it is different from the 2001 period. the revenue multiples where cash flow and earnings exist are getting higher. i do think that is roughly 10%. the nasdaq is likely to have an impact on the stage round. there will be some moderation because of that. as far as companies that have no business model, that is not accurate. >> you do not think the growth is sustainable? the funding round that we are seeing, that is not -- >> i think that valuations are sustainable, but i do not know that they will continue to accelerate at this pace. many investors are looking at
next year's revenues. they are pricing their investments off of that. the growth rate has to be there to support valuations. i do not think it will double again. we have seen the private markets. >> you guys just raised a new round. you are starting your next chapter. facebook was a huge hit. what will be the next chapter? >> we are looking at a broad range of technologies.
we are looking across the software areas that we have covered previously. i think one of the areas that is harder to report on is the incredible revolution that is happening on data centers in the cloud. the press reports around these trends in big data -- fundamentally, whether it is stored for networking, we are just at the very beginning of that revolution. >> venture capital firms have changed dramatically. a lot more firms are going full service. andreessen horowitz has been a pioneer in that area. >> you have to find entrepreneurs who you believe in. they often choose us because of our area of expertise -- a partner of mine is very well known in big data. there are a lot of investments
in that space. i spend a lot of time thinking about the mobile space. entrepreneurs will value that vertical knowledge and that access to the network. all of the firms are adding other resources, whether it is helping recruiting or pr. that is in addition to andreessen horowitz. >> one of your portfolio companies is moving to wholesale. what do you think about that? >> etsy is an amazing company. it is a leader in the handmade marketplace. one million sellers making handmade goods. they are disturbing those products through the etsy website. now there is an opportunity to distribute them through retailers. the company sees their mission
>> i'm emily chang. this is "bloomberg west." we are streaming on your phone, tablet, and bloomberg.com. intel's transition is making progress. the world's largest chipmaker reported a rise in revenue. for more on its transition to mobile, i am joined by cfo stacy smith. this is the first time that intel has given out financial details in mobile. why now?
>> it is how we think about our business. it is how we organize the company. what is different about our business today is that we ship to a broad range of devices. we have a very healthy business. we did 5 million tablets in the first quarter. we have this healthy internet of things business that is growing. >> everyone is talking about the internet of things. you guys just bought a wristband maker. do you wear a wristband? do you think these will be big? >> i have worn a wristband. i will not say the brand because i will not say it on tv. the internet of things business is a sprawling business. it ranges from payments to devices in your house to devices in factories. there is a new category of wearables. we are part of the internet of
things. we have done well over $2 billion. we are off working with customers in the wearables space. we are doing a lot of experimentation. we are finding and buying companies. i do not know how it will play out, but we're there early. our intent is that when the winners emerge, we will be there with them. >> in that experimentation, what is the most exciting thing you have seen? >> generally, the most exciting thing is the level of innovation. it is a hot area. there are all kinds of interesting things that range from bio sensors to visual computing solutions to things that can interpret your -- and provide information back to you. it is really exciting. it is a space where requirements about having great computing capability at a low-power is ready-made for us because of our manufacturing leadership. >> every chipmaker is saying that the internet of things is a big opportunity. a lot of these makers are using
specific designs. why will they go with intel? >> for us, it is not a plan to win a markeplace. if you look at our business results, you see that we are, if not the leader, then one of the leaders in the deals already. we have business of over $2 billion and growing superfast. the reason that we are being so successful in this is because of our manufacturing. we can provide more performance in a very low-power envelope. that is our competitive advantage. that is allowing us to win in the marketplace.
>> your ceo has promised 40 million tablets running on intel. how do you get to 40 million by the end of the year? >> we have a good line of sight. the tablet market is consumer driven. there is a lot more volume in the back half of the year because of the consumer selling season. we look at it as being right on track. we are right on track in terms of the engagement with the customer and the design we want. our customers have expectations of how much volume we will ship. we feel pretty good about where we are at. there is a lot of work to do, but we are off to a great start.
>> you are giving subsidies to support this effort. how you think about that as a cfo? >> in 2014, we want to grow business. as we achieve our goal, that will put us between 15%-20% of the tablet market. we will have application developers and a lot of excitement. people will develop on our architecture. we have a slew of projects coming in. next year we have a product that will give leadership and performance in the midrange of the tablet market. we will intercept our footprint with these great products. we will go from there. it is a gutsy move, but it is a smart move. >> what about phones? we have spoken to investors who do not believe that you are in the phone business. will you make a flagship device? when will we see intel in a non-negligible capacity? >> we have talked about the shift in our strategy.
2013 was about getting into a lot of different devices in order to learn what we needed to learn about the marketplace. we wanted to make sure that we could demonstrate to the world that an intel phone would hit the right power envelopes. we not only had leadership performance, but we also had leadership battery life as well. we did that in 2013. in 2014, we are focusing on the volume, the market makers. i will announce it as they deem appropriate. we will go after the big guys. we will grow our volume. >> how about cars? this is the new battlefield between apple and google and even blackberry. what is intel's market share in cars? >> it is pretty high and growing. we called an investor call and we saw 32% growth in the internet of things. there were two segments that were extraordinarily strong. automotive and infotainment were both parts of it .
we have a lot of things coming into the market. >> we will be watching. a lot of ambitious plans. stacy smith, thank you for joining us on "bloomberg west." >> my pleasure. >> from csi to movies like "top gun," jerry bruckheimer has seen great success. we are talking to the famous producer about his next project. that is still to come on "bloomberg west." ♪
this is "bloomberg west." jerry bruckheimer is back with two sequels in the works. he has just reached a deal with paramount pictures for his "beverly hills cop" and "top gun" franchises. he is the subject of a new book. >> we put a lot of time and energy into making this look interesting and unusual. we try to put something special and different in what we do. that is important to us. in terms of where the movie business is going, you had a long run with disney and now you have this first look deal with paramount. you have talked about how disney is focused on its movies and you are focused on your movies and disney is doing a lot of superhero movies. is there going to be superhero fatigue at some point?
>> i don't know. i saw the latest captain america and i thought it was great. everybody is cheering and laughing. it is a great experience. that is what movies are all about. that is why you leave your living room, to go see the movies that are effective. as long as you make interesting movies, people always leave their house. >> the first film that you highlighted as part of this deal with paramount is that you are working on another "beverly hills cop." what can you tell us about it? >> we are in the process of getting a script. paramount is very excited about making it. we are excited about doing it. we are moving forward. hopefully we will start at the end of summer and get rolling. we will take eddie back to detroit. we will have fun with him. he is really excited about doing it. >> the film that everyone has been talking about is the next "top gun." you have been working on it, but this is a long process for you and tom cruise. you made some headlines recently.
tom cruise versus the drones. >> technology has changed since the first one. we will take advantage of what is going on. is the pilot obsolete? those jockeys, are they gone? i don't think so. i think they will be around for quite a wild. we will hopefully highlight both worlds. >> what is the timing on that one? when will we see it in theaters? >> we have been working on it for over 30 years. i wish i could tell you how long it will take. it is a lot of fun working with tom. and tony scott came up with the idea. he passed away and that was sad for us. david ellison is a financier. >> a lot of people talk about
the ellison family. megan gets a lot of attention during the award season. what can you tell us about david? >> he is a pilot. he loves flying. he has great taste. the movies he has made have been very successful. he understands the business better than anybody. for a guy so young to understand the deals and what actors work and what writers work, he has done his homework. i am proud of what he brings to the project. >> jerry bruckheimer with jon erlichman. do you think a "top gun" sequel can be as good? >> there is a high bar. i think that is always the notch against sequels.
but you have tom cruise on board. that is one of the reasons that studios love to go back -- and then money. sequels can be a bankable thing. speaking of that, we also asked jerry -- technically he is moving on from disney. we asked him about the next installment of the pirates franchise. here is what he said. >> we are working on it. it is moving forward. johnny is excited. we are excited. hopefully we will get that going. maybe at the end of the year if everything lines up. >> for those who do not follow the movie business, johnny is johnny depp. >> are we on pirates of the caribbean 10? [laughter] are we waiting for number four? >> there was talk that they would do a fifth and sixth back-to-back.
>> thank you for catching us up. it is time for the bwest byte. what you have? >> 10,000. marissa mayer shared interesting statistics about tumblr. she said the average tumblr post is re-blogged about 14 times. but the average sponsored post is re-blogged 10,000 times. she has used this number a couple of times recently. she is not telling us how many total tumblr adds are out there. that is the point. they are taking a different route. if you are going to make a sponsored post, it has to be great. something that would be shared in a big way. the difference is for yahoo!. >> at the yahoo! earnings call today [inaudible] jon erlichman, thank you so much.